UK, German PMI Above 50.0 While UK Manufacturing Employment Appears "Ominous"

The Royal Bank of Scotland reported Thursday that both the UK and Germany stayed above the 50.0 mark in January, while the British Chambers of Commerce see tough times ahead for UK manufacturing employment.

Both the UK and Germany stayed above the natural 50.0 mark in January, according to the Royal Bank of Scotland’s (RBS) Purchasing Manager Index (PMI) released Thursday, while a report released from the British Chambers of Commerce mark troubling times ahead for UK manufacturing employment.

January saw the rates of expansion for UK manufacturing production and new orders accelerate for the first time in five months, for a PMI of 52.8.

UK manufacturing production increased for the nineteenth consecutive month, with impressive growth in the intermediate goods sector. Increases were noted in both the domestic and export order markets.

An increase in average purchase prices was noted, and is linked to higher costs for chemicals, energy, metals, paper and plastics. Companies were, however, able to pass on part of this increase to their clients.

Meanwhile, a report released Thursday from the British Chambers of Commerce (BCC) found that nearly 8,000 UK manufacturing jobs have been lost since the beginning of 2007, citing issues handling recent interest rates which were used to halt increasing inflationary pressures in the UK economy.

While the UK economy as a whole saw above average growth in the last quarter of 2006, the UK manufacturing industry experienced a decline with figures revealing a sharp fall in export orders and sales. Increasing wage costs, a strong monetary system and cheaper imports continue to put UK manufacturers under continued pressure to either downsize or relocate.

David Frost, Director General of the BCC said: “2007 is looking ominous for the manufacturing sector. There has been a relentless decline in the number of jobs which it provides in the UK economy and this shows no sign of abating.”

The job cut figures show the fragile state of an industry which is facing a number of difficult challenges including dealing with the negative impact of interest rate rises in the past few months.

Germany’s PMI for January 2007 was 58.5, down from 59.4 in December. Although a slight decrease was noted, the index has now been above the 50.0 mark for seventeen consecutive months.

Higher workloads in January were supported by the strongest rise in new export orders for seven months. The latest rise in workloads encouraged continued job creation, leading to the sharpest rate of employment growth for seven months.

Average input cost inflation accelerated to its strongest pace for three months in January, as higher raw material and energy costs led to increased cost burdens.

All Eurozone PMI reports from the RBS can be reviewed by clicking here.

More in Supply Chain